Transfer and Business Taxes Solutions Manual Tabag Garcia 2015 PDF

SOLUTIONS MANUAL
TRANSFER & BUSINESS TAXATION, 2015 Edition

By: TABAG & GARCIA
CHAPTER 1 – SUCCESSION & TRANSFER TAXES

TRUE OR FALSE
1. TRUE 6. TRUE 11. FALSE 16. TRUE
2. TRUE 7. FALSE 12. TRUE 17. FALSE
3. FALSE* 8. FALSE 13. TRUE 18. TRUE
4. FALSE 9. TRUE 14. TRUE 19. TRUE
5. FALSE 10. FALSE 15. FALSE 20. TRUE
*The taxpayer for estate tax purposes is the estate as a juridical person.
MULTIPLE CHOICE
1. D 12. C 23. D 34. D 45. B
2. A 13. C 24. B 35. B 46. C
3. D 14. B 25. D 36. B 47. D
4. C 15. D 26. D 37. D 48. D
5. C 16. C 27. B 38. B 49. A
6. A 17. B 28. D 39. D 50. B
7. B 18. D 29. A 40. D 51. A
8. A 19. C 30. D 41. B 52. D**
9. B 20. B 31. B 42. D 53. D
10. A 21. B 32. A 43. B 54. D
11. D 22. B 33. D 44. B 55. B
**Inheritance and repudiation takes effect upon death of the decedent
CHAPTER 2 – GROSS ESTATE
1| Transfer & Business Taxation(2015 Edition) by Tabag and Garcia

PROBLEM SOLVING
(P2.1) (1) P19,300,000 (2) P19,300,000 (3) P11,800,000 (4) P14,300,000
Citizen/ NRA with R NRA w/o R
Resident
(# 1 & 2) (# 3) (# 4)
Family home in the Philippines P8,000,000 P8,000,000 P8,000,000
Parcel land of with vacation house in Malaysia 5,000,000
Farm land in the Philippines 3,000,000 3,000,000 3,000,000
Shares of stock of a domestic corporation deposited in a bank 2,000,000 2,000,000
safety deposit box in Malaysia
Shares of stock of a foreign corporation the entire business of 500,000 500,000
which is in the Philippines, deposited in a bank safety deposit
box in Malaysia
Receivable from a friend who has no property whatsoever 300,000 300,000 300,000
Receivables under insurance policies:
 Life insurance policy, taken by the decedent on his own 200,000 200,000 200,000
life, with his estate as revocable beneficiary
 Life insurance policy, taken by the decedent, with his 300,000 300,000 300,000
daughter as revocable beneficiary
 Life insurance policy, taken by the decedent on his own - - -
life, with his son as irrevocable beneficiary
 Life insurance (group) taken by the employer of the - - -
decedent, with the estate as revocable beneficiary
 Property insurance, for a loss of property 50,000 50,000 50,000
 Accident insurance, for injury sustained 50,000 50,000 50,000
TOTAL GROSS ESTATE P19,300,000 P11,800,000 P14,300,000
(P2.2)
To Juan P25,000,000
To Pedro 18,000,000
To Maria 15,000,000
To Sisa 20,000,000
Total Gross Estate P78,000,000
(P2.3)
Shares of stock (Frozen Co.)
[(P8M+3M)/800,000sh x 100,000 shares P1,375,000
Shares of stock (Divergent Co..)
100,000 shares x P15** 1,500,000
Shares of stock (Lenovo Co..)
100,000 shares x P12 1,200,000
***Mean value shall be used only if the quotation price at the date of death is not determinable (RR 2-2003)
(P2.4) (1)P230,0000; (2)P1,100,000; (3)P0; (4)P5,000,000; (5)P1M + [1M x (1M x 10% x 1.5)] = P1,150,000
MODIFIED IDENTIFICATION
EXERCISE A
1. Included 6. Excluded
2. Included 7. Excluded *
3. Excluded 8. Included **
4. Included 9. Excluded

5. Excluded 10. Included***
*Designated by the prior decedent
**Exclusions from the gross estate. Nonetheless, the tax code requires these items to be included first in the gross
estate before deducting the same from the gross estate.
*** Bequests to charitable institutions are considered exclusions from the gross estate only if the problem clearly states
that not more than 30% were used for administrative purposes. However, even if not more than 30% of the bequests
were used for administrative purposes, the tax code still require these items to be included first in the gross estate
before deducting the same for estate tax purposes.
EXERCISE B EXERCISE C
1. P0; valid sale 1. P10M
4. P4,000,000 4. P10M
5. P6,000,000 5. P0
TRUE OR FALSE
1. TRUE 6. FALSE 11. FALSE 16. TRUE
2. TRUE 7. FALSE 12. TRUE 17. TRUE
3. TRUE 8. FALSE 13. TRUE 18. FALSE
4. FALSE 9. TRUE 14. FALSE 19. TRUE
5. TRUE 10. TRUE 15. FALSE 20. FALSE
MULTIPLE CHOICE
1. A 16. D 31. C 46. D 61. A
2. B 17. C 32. B 47. C 62. A
3. D 18. B 33. A 48. C 63. C
4. B 19. D 34. B 49. D 64. D
5. C 20. A 35. B 50. D 65. B
6. C 21. D 36. D 51. D 66. A
7. A 22. A 37. C 52. C 67. C
8. B 23. B 38. B 53. C 68. C
9. A 24. A 39. C 54. C 69. D
10. A 25. C 40. C 55. B 70. D
11. A 26. C 41. C 56. D 71. D
12. B 27. C 42. B 57. C 72. A
13. D 28. D 43. C 58. C 73. D
14. A 29. B 44. B 59. A 74. D
15. C 30. D 45. C 60. A 75. B
Supporting Computations (Multiple Choice):

(22) .
Bank deposit in the foreign branch of a domestic bank P500,000
Bank deposit in Makati branch of a foreign bank 300,000
Shares of stock issued by a domestic corporation 1,000,000
(certificate kept in Canada)
Franchise exercised in Manila 800,000
Receivable, debtor from Mindanao 200,000
Total Exclusion from the gross estate P2,800,000
(23) .

House and lot, family home in Quezon City P1,500,000
Bank deposit in Makati branch of a foreign bank 300,000
Shares of stock issued by a domestic corporation 1,000,000
(certificate kept in Canada)
Franchise exercised in Manila 800,000
Receivable, debtor from Mindanao 200,000
Total Inclusion from the gross estate P3,800,000
(25) .
Shares of stocks, domestic corp. P250,000
(certificate kept in UK)
Shares of stocks, domestic corp. 100,000
(certificate kept in Phils.)
Franchise exercised in the Phils. 200,000
Receivables, debtor is from Phils. 50,000
Intangibles subject to reciprocity P600,000
(26) .
Land & building, Philippines P2,000,000
House and lot, Philippines 3,500,000
Shares of stocks, domestic corp. (certificate kept in UK) 250,000
Shares of stocks, domestic corp. (certificate kept in Phils.) 100,000
Franchise exercised in the Phils. 200,000
Receivables, debtor is from Phils. 50,000
Gross Estate P6,100,000
(32). (P12M/100,000) x 1,000 shares = P120,000

(33). P100 x 1,000 shares = P100,000; Par Value=P10M/100,000 = P100/share
(34). P110 x 1,000 shares = P120,000
(35). (P140 + P80/2) x 1,000 shares = P110,000
(43) .
Consideration FMV upon transfer FMV upon death Gross Estate
received
Land P1,500,000 P1,500,000 P2,000,000 None. Valid sale
Shares of stock 100,000 50,000 150,000 None. Valid sale
Vintage car 50,000 80,000 100,000 P50,000
Painting 250,000 400,000 500,000 250,000
INCLUSION IN THE GROSS ESTATE P300,000
CHAPTER 3 – DEDUCTIONS FROM THE GROSS ESTATE
PROBLEM SOLVING
(P3.1) (Funeral Expenses)
Case A: P150,000
Case B: P200,000
Case C: P150,000
Case D: P150,000
(P3.2) P0
Mourning clothing (donated by the decedent’s employer) P-
Expenses paid by relatives -

Telecommunication charges paid by the friends -
Cost of burial plot, coffin, interment fees and other funeral charges -
paid by an insurance company
DEDUCTIBLE FUNERAL EXPENSE -nil-
(P3.3) P183,500 computed as follows:

Embalming charges P15,000
Burial apparel of the decedent 3,500
Cost of coffin 85,000
Mourning apparel of the surviving spouse during the burial 2,000
Mourning apparel of the minor child (P12,000/6) 2,000
Snacks and drinks during the wake 12,500
Honoraria of priest for daily masses before burial 4,000
Telecommunication charges to inform relatives 10,000
Charges for death notice published in a newspaper 1,500
Cost of video footage of the burial and interment 12,000
Funeral car service during interment 4,000
Honorarium of priest who celebrated the mass during interment 2,000
Cost of tombstone 30,000
ACTUAL FUNERAL EXPENSE P183,500
Vs. Limit (P5% of P10M) 500,000
ALLOWABLE FUNERAL EXPENSE P183,500
NOTE: Hospital bills for two months of confinement before decedent’s death should be charged to “medical expenses”
(P3.4) (Claim Against Insolvent Persons)

Case A: P100,000
Case B: P333,333 computed as follows:

Receivable P500,000
Collectible portion (400/1,200) x 500,000 (166,667)
Deductible claim (Uncollectible portion) P333,333
Case C: P0. Debtor is not insolvent
CaseD: P0. Debtor is not insolvent

Total Assets P1,200,000
Taxes payable (Gov’t is a priority creditor) (800,000)
Assets after deducting unpaid taxes P400,000
Receivable (CAIP) P500,000

Collectible (400/800) x 500,000 (250,000)
Deductible Claim against Insolvent Persons P250,000

Debtor’s Assets P400,000
Taxes payable (Gov’t is a priority creditor) (200,000)
Assets after deducting unpaid taxes P200,000
Receivable (CAIP) P200,000

Collectible (200/600) x 200,000 (66,667)
Deductible Claim against Insolvent Persons P133,333

(P3.6) P2,097,000 computed as follows:
Ordinary Deductions:
Claim against insolvent person (500,000-400,000) P100,000
Unpaid taxes on the estate before death 150,000
Unpaid mortgage on the estate 200,000
Funeral expenses 200,000
Actual = P182,000 + 37,500 = P219,500
Limit = P5M x 5% = P250,000
Maximum = P200,000
Judicial expenses 100,000
Unpaid loans arising from debt instruments (notarized) 125,000
Unpaid loans arising from debt instruments (not notarized). The 75,000
debt instrument was issued by a financial institution not requiring
notarizations for debt instruments issued
Casualty loss 65,000
Special Deductions:
Standard deduction 1,000,000
Medical expenses 82,000
Total Allowable deduction from the gross estate P2,097,000
(P3.7)
Question 1: P217,500
Question 2: P217,500
Same answer with question #1. Whether or not the estate was settled judicially is
irrelevant in the determination of allowable deduction for judicial expenses.
Solution:
Expenditures incurred for the collection of assets and payment of debts P100,000
Attorney’s fees (1/2 were incurred after six months) P40,000 x 1/2 20,000
Accountant’s fees 25,000
Executor’s commission 15,000
Appraiser’s fees 2,500
Court fees 18,000
Cost of preserving and distributing the estate 15,000
Cost of storing or maintaining the property of the estate 12,000
Brokerage fees for selling property of the estate 10,000
Total allowable judicial expenses P217,500

To the executor, for time and effort in executing the will P30,000
To a lawyer, for legal advice in carrying out the will 80,000
To an appraiser, for establishing property values 70,000
To an accountant, for estate tax return preparation 30,000
Court fees 18,000
Cost of preserving and distributing the estate 15,000
Cost of storing or maintaining the property of the estate 12,000
Brokerage fees for selling property of the estate 10,000
DEDUCTIBLE JUDICIAL EXPENSES P265,00

0

Loss due to shipwreck, two (2) months after the decedent’s death. P500,000
Robbery loss, seven (7) months after the decedent’s death. The decedent’s 2,000,000
executor was allowed by the Bureau of Internal Revenue to extend
the filing (within the period allowed by the Tax Code) of estate tax return due
to a meritorious reason
Allowable Deduction P2,500,000

Value to take P937,500
1st Deduction: Mortgage paid (187,500)
Initial basis P750,000
2nd Deduction: Proportionate deduction
(750/4,500) x 562,500 (93,750)
Final Basis P656,250
x Vanishing rate 40%
Vanishing Deduction P262,500
(P3.11) STANDARD DEDUCTION

Case A: P1,000,000
Case B: P1,000,000
Case C: P1,000,000
Case D: P0
Case E: P0
(P3.12) MEDICAL EXPENSES
Case A: P500,000
Case B: P500,000
Case C: P150,000
Case D: P500,000
Case E: P0
(P3.13) FAMILY HOME

Case A: P1,000,000
Case B: P500,000
Case C: P0
Case D: P500,000
Case E: P600,000
Case F: P750,000; [ (1M/2) + (500,000/2)]

Funeral expenses P150,000
Actual P300,000 – 120,000 = P180,000
Limit = P3M x 5% = P150,000
Standard deduction 1,000,000
Total amount deductible from the gross estate P1,550,00
0

(P3.15)
Question 1: P2,430,000 (Decedent: Resident Citizen)
Question 2: P2,430,000 (Decedent: Resident Alien) (same computation with Q#1) .
Domestic shares of 2,000 shares inherited 6 years ago P800,000
House and lot, family home, located in Europe, inherited 2 years ago 2,000,000
Jewelry items, in the Philippines at the time of death 400,000
Jewelry items kept in a vault abroad 200,000
Bank deposit in a Philippine branch of a U.S. bank 500,000
Transfer for Public Use 250,000
GROSS ESTATE P4,150,000
ORDINARY DEDUCTIONS:
Funeral expenses, Philippines (max.) 200,000
Judicial expenses, abroad 100,000
Judicial expenses, Philippines 50,000
Claims against the estate 120,000
Transfer for Public Use 250,000
Vanishing deductions - (720,000)
SPECIAL DEDUCTIONS
Standard Deduction 1,000,000
Family Home -
Medical Expenses -
RA 4917 - (1,000,000)
NET TAXABLE ESTATE P2,430,000
(P3.16) Question 1: P2,757,500 computed as follows:

GROSS ESTATE:
TFPU P300,000
House & lot in Makati, F. Home 1,500,000
Personal properties 1,500,000
Farm lot 825,000
Claim against an insolvent debtor 225,000
Transfer in contemplation of death 1,500,000 P5,850,000
DEDUCTIONS:
TFPU 300,000
CAIP 225,0000
Unpaid mortgage on the farm lot 75,000
Standard 1,000,000
F.Home 1,000,000 (3,092,500)
TAXABLE NET ESTATE P2,757,50
0
Question 2: P2,672,330 computed as follows:

GROSS ESTATE:
TFPU P300,000
House & lot in Makati, F. Home 1,500,000
Personal properties 1,500,000
Farm lot 825,000
Claim against an insolvent debtor 225,000
Transfer in contemplation of death 1,500,000 P5,850,000
DEDUCTIONS:

TFPU 300,000
CAIP 225,0000
Unpaid mortgage on the farm lot 75,000
VANISHING DEDUCTIONS** (85,170)
Standard 1,000,000
F.Home 1,000,000 (3,177,670)
TAXABLE NET ESTATE P2,672,33
0
Value to Take P575,000
Less: Mortgage paid (150,000-75,000) (75,000)
Initial Basis P500,000
Less: Proportionate Deduction

(500/5,850 x P867,500 (74,145)
x Vanishing Deduction Rate 20%
VANISHING DEDUCTION P85,170**
(P3.17) Question 1: P426,000 computed as follows:

VTT Land P1,250,000
Mortgage paid (50,000)
Initial Basis 1,200,000
2nd Deduction
1,200/8,000 x 900,000* (135,000)
Final Basis 1,065,000
x Vanishing Deduction Rate 40%
*1,200+100-100600+300=P900,000
Question 2: P4,174,000 computed as follows:

GE P8,000,000
ELIT (600,000)
TFU (300,000)
VD (426,000)
Stndrd (1,000,000)
FHome (1,000,000)
Med Exp (500,000)
TNE P4,174,000
TRUE OR FALSE
1. TRUE 7. TRUE 13. FALSE 19. TRUE 25. TRUE
2. TRUE 8. TRUE 14. FALSE 20. TRUE 26. TRUE
3. TRUE 9. TRUE 15. TRUE 21. TRUE 27. FALSE
4. TRUE 10. FALSE 16. FALSE 22. FALSE 28. TRUE
5. TRUE 11. FALSE 17. TRUE 23. TRUE 29. FALSE
6. FALSE 12. FALSE 18. TRUE 24. TRUE 30. TRUE
MULTIPLE CHOICE

1. C 11. C 21. A 31. C 41. C
2. D 12. B 22. A 32. A 42. A
3. D 13. A 23. B 33. C 43. A
4. C 14. A 24. B 34. B 44. C
5. B 15. A 25. B 35. B 45. D
6. B 16. D 26. C 36. D 46. A
7. D 17. D 27. A 37. A 47. A
8. C 18. C 28. C 38. D 48. A
9. A 19. D 29. D 39. D 49. B
10. B 20. P650,000 30. C 40. D 50. D
Supporting Computation (Multiple Choice):

(6) .
Mourning clothing of the decedent’s surviving spouse P1,500
Mourning clothing of the decedent’s dependent children 3,200
Expenses of the wake preceding the burial 40,000
Publication charges for death notices 5,000
Telecommunication expenses incurred in informing relatives of the 3,000
deceased
Cost of burial plot 20,000
Interment fees and charges 12,000
Expenses for the performance of the rites & ceremonies incident to 5,000
interment
Actual Funeral Expenses P89,700
Limit: 5% of Gross Estate (P2M x 5%) P100,000
ALLOWED (Lower Amount) P89,700
(14.)
Real property tax for the year 2013 P100,000
Notarized interest bearing promissory note 100,000
Accrued interest on the promissory note at the time of death 20,000
Income tax due for 2013 200,000
Allowable deductions P420,000
(20) .
Income tax from practice of profession - 2013 P300,000
Income tax from practice of profession for Jan.-June ‘14 100,000
Real property taxes for 2013 150,000
Business taxes for 2013 100,000
Deductible taxes P650,000
(37) .
Value to take/Initial Basis P900,000
Mortgage paid (50,000)
Initial basis 850,000
2nd Deduction:
(850/1,000 x P100,000**) (85,000)
X Vanishing rate 40%
VANISHING DEDUCTION P306,000
** Mortgage P150,000 – 50,000
10 | Transfer & Business Taxation(2015 Edition) by Tabag and Garcia

(49) .
Shares, domestic corporation P500,000
Tangible personal property 1,500,000
Gross Estate 2,000,000
ELIT (500,000 x 2,000/2,500) (400,000)
Taxable Estate P1,600,000
TAX DUE
1st P500,000 P15,000
In excess of P500,000 = (1,100,00 x 8%) 88,000
Estate Tax Due P103,000
(50) .
Gross Estate (Tangible property Phils.) P6,000,000
ELIT (1,200,000 x 6,000/10,000,000) (720,000)
Taxable Estate P5,280,000
CHAPTER 4 – PROPERTY RELATIONS
PROBLEM SOLVING
P4.1
ACP CPG
1. C E
2. C C
3. C E
4. C E
5. E E
6. C E
7. E E
8. C E
9. E E
10. E E
P4.2
Exclusive Common Total
Land inherited during marriage P2,400,000
Other personal property owned before marriage P1,600,000
Other personal property acquired during marriage 500,000
Total P2,400,000 P2,100,000 P4,500,000
Deductions:
Funeral expenses (200,000)
Judicial expenses (100,000)
Vanishing deduction** (1,120,000)
Net estate before special deduction and share of P1,280,000 P1,800,000 P3,080,000
the surviving spouse
Standard deduction (1,000,000)
Medical expenses (500,000)
Share of the Surviving Spouse (1,800,000/2) (900,000)
NET TAXABLE ESTATE P680,000
VANISHING DEDUCTION**
Value to Take/Initial Basis P1,500,000

Proportional Deduction (1,500/4,500 x P300,000) (100,000)
Final Basis P1,400,000
x Vanishing Deduction % 80%
Vanishing Deduction P1,120,000
 Since the problem is silent as to the type of the marriage settlement but one of the requirements is
to compute for “community property”, ACP should be used. The term “community” property is
applicable to ACP.
P4.3
(a)P1,624,773 (b)P4,132,955 (c)P3,691,250 (d)P321,038
Exclusive properties P2,000,000
Conjugal properties* P5,000,000 P7,000,000
ELIT** (867,045)
Vanishing Deductions *** (175,227)
Transfer for Public Use **** (200,000)
Net Estate P1,624,773 P4,132,955 P5,757,728
Share of the Surviving Spouse (4,132,955/2) (2,066,478)
Net Taxable Estate P3,691,250
1st P2,000,000 P135,000
In excess of P2,000,000 @ 11% 186,038
ESTATE TAX DUE P321,038
*The problem is silent as to reciprocity, hence, the gross estate should include tangible and intangible properties within
the Philippines.
**ELIT:
Claim against the estate 1,725,000
TOTAL ELIT P2,725,000
X 7,000/22,000
ALLOWABLE ELIT P867,045
**VANISHING DEDUCTIONS:
Value to take P500,0 00
1st Deduction: Mortgage paid -
Initial basis P500,000
(500/7,000) x 867,045 (61,932)
**** Since the properties were already classified as exclusive and common, it should be assumed that the
exclusive properties were already inclusive of transfer for public use.
P4.4
(Decedent: Resident Citizen)
a) Vanishing deduction = P1,676,200
b) Net exclusive property of the decedent = P7,200,000
c) Net community property = P19,300,000
d) Net Taxable estate = P14,850,000
e) Estate tax due = P2,185,000

Exclusive Conjugal Total
Conjugal properties 20,000,000 P30,000,000
Funeral expenses (200,000) (200,000)
Judicial expenses (300,000) (300,000)
Claims against conjugal properties (200,000) (200,000)
Claims against exclusive properties* (400,000) (400,000)
Legacy-local government (Tr. for Public Use) ** (723,800) - (723,800)
VANISHING DEDUCTION*** (1,676,200) (1,676,200)
Net exclusive/conjugal P7,200,000 P19,300,000 P26,500,000
Special Deductions:
Amount received under RA4917 (1,500,000)
Share of the surviving spouse (P19.3M/2) (9,650,000)
ESTATE TAX DUE (Refer to the Tax Table) P2,185,000
*From the information provided in the problem, the amount of P400,000 as “claim against exclusive property” should
pertain to the unpaid mortgage on the land inherited. Therefore, the present decedent paid P100,000 on the original
amount of the mortgage (P500,000). This should be taken into consideration in computing the vanishing deduction.
** LEGACY AGAINST EXCLUSIVE PROPERTIES
Legacy means bequest or inheritance of personal properties. The deductible legacy/devised (bequests) under the tax
code are:
 Transfer for “public use” (Rule: Include both in the “Gross Estate” as well as in the “Deductions from the
Gross Estate) ; and
 Bequests to charitable institutions wherein not more than 30% of the bequest was used for administrative
purposes (Rule: Same as transfer for public use)
TRANSFER FOR PUBLIC USE

Value to take P3,000,000
Mortgage Paid (refer to explanation above) (100,000)
Initial basis P2,900,000
2nd Deduction: 2,900/30,000 x P1.1M (106,333)

x rate 60%
Vanishing Deduction*** P1,676,200
P4.5 (Decedent: Resident Alien) (a) Net Taxable estate = P3,570,000; (b)Estate tax due = P307,700
House and lot, USA * P2,000,000
Investment in stock, Philippines 800,000
Investment in stock, USA 1,000 000
Investment in bonds, USA 700,000
Cash in bank, Philippines 300,000
Cash on hand, Philippines 50,000
Accounts receivable (fully uncollectible) 200.000
Car, Philippines 800,000
Legacy in favor of Philippine National Red Cross** 50,000
Devise to Quezon City for children’s playground** 70,000
Unpaid Philippine income tax for income in 2011 120,000
Loss on December 31, 2012 due to theft 10,000
Legacy in favor of Philippine National Red Cross 50,000
Devise to Quezon City for children’s playground 70,000
Accounts receivable (fully uncollectible) *** 200,000 (900,000)
Special Deductions:
Estate Tax Due (Refer to the Tax Table) P307,700
 *Family home is not allowed as a deduction for single decedent
**To be deductible, the legacy/devise should be included first in the decedent’s gross estate
***Assume the debtor is an insolvent person.
P4.6 (Decedent: Resident Alien)

a) Vanishing deduction = P441,463
b) Net Taxable estate = P3,200,000
c) Estate tax due = P386,739
Exclusive Conjugal Total
Land P3,000,000
House and Lot, furniture and appliances P5,000,000
Other tangible personal properties 1,200,000
Amount received under RA4917 1,000,000
Claims against insolvent persons 50,000 P10,250,000
Ordinary deductions:

Other claims against conjugal properties (500,000)
Claims against insolvent persons (50,000)
Unpaid mortgage** (350,000)
VANISHING DEDUCTION* (441,463)
Net exclusive/conjugal P2,208,537 P6,400,000 P8,608,537
Special deductions:
Share of the surviving spouse (3,200,000)
TAXABLE ESTATE P4,288,537
Value to take/Initial Basis*** P2,500,000

2nd Deduction: 2,500/10,250 x 1,200,000 (292,683)
x rate 20%
Vanishing Deduction* P441,463
** P700,000 – 350,000 = P350,000
***The amount paid on the mortgage should not be considered in computing the vanishing deduction because the
amount pertains to a mortgage entered into by Pedro during his lifetime. To be deductible, the mortgage should have
been assumed on the property at the time of inheritance.
TRUE OR FALSE
1. TRUE 6. FALSE 11. FALSE
2. TRUE 7. FALSE 12. TRUE
3. TRUE 8. TRUE 13. TRUE
4. FALSE 9. TRUE 14. FALSE
5. FALSE 10. FALSE 15. TRUE
MULTIPLE CHOICE
1. 7. 13. 19. 25.
2. 8. 14. 20. 26.
3. 9. 15. 21. 27.
4. 10. 16. 22. 28.
5. 11. 17. 23. 29.
6. 12. 18. 24. 30.
Supporting Computations (Multiple Choice)

(No. 22 & 23)
Gross Estate: Exclusive Conjugal
Rest House in Batangas P2,500,000
Car 1,000,000
Commercial land 5,000,000
Income from the commercial land 500,000
Income from exclusive property of the spouse 200,000
Jewelry owned before the marriage 300,000
Other properties at the time of her death 1,000,000
Gross Estate P8,800,000 P1,700,000

(No. 24 & 25)
Gross Estate: Exclusive Common
Rest House in Batangas P2,500,000
Car 1,000,000
Commercial land 5,000,000
Income from the commercial land 500,000
Jewelry owned before the marriage 300,000
Other properties at the time of her death 1,000,000
Gross Estate P2,500,000 P7,800,000
(No. 26)
Conjugal properties P200,000
Conjugal Deductions:
Actual = P45,000
Limit = (P500,000 + 200,000) x 5% = 35,000
Claim against the estate (45,000)
Net Conjugal properties P100,000
Divide 2
Share of the Surviving Spouse P50,000
(No. 27)
Real property, Philippines P4,000,000
Real property, USA 5,000,000
Judicial expenses (200,000 – 50,000) (150,000
Claim against insolvent persons (50,000)
Unpaid taxes (50,000)
Balance P8,550,000
Standard Deductions (1,000,000)
Medical expenses (max.allowed) (500,000)
Family Home (P1,500,000/2) (750,000)
Share of the surviving spouse (P8,550,000/2) (4,275,000)
(No. 28)
Conjugal real properties P5,000,000
Conjugal family home 1,500,000

Total P2,500,000 P6,500,000 P9,000,000
Actual P300,000 x 25% = P75,000
Limit = 5% x P9M = P450,000
Casualty losses (from excl.property) (100,000)
Miscellaneous deductions (P1M x 75%) (750,000) (825,000)
Net P2,400,000 P5,675,000 P8,075,000
Special Deductions:
Standard Deductions (1,000,000)
Medical expenses (P500,000 x 50%) (250,00)
Family Home (1,500,000/2) (750,000)
Share of the surviving spouse (5,675,000/2) (2,837,500)
(No. 29) ABSOLUTE COMMUNITY OF PROPERTY

Exclusive Common
Properties-Land P2,400,000
Other personal property owned before marriage 1,600,000
Other personal property acquired during marriage 500,000
Gross Estate P2,400,000 P2,100,000
Net conjugal before special deductions P1,800,000
Share of surviving spouse (P1,800,000/2) P900,000
(No. 30) CONJUGAL PARTNERSHIP OF GAINS

Properties-Land P2,400,000
Other personal property owned before marriage 1,600,000
Other personal property acquired during marriage**** P500,000
Gross Estate P4,000,000 P500,000 P4,500,000
Ordinary Deductions
Vanishing Deductions***** (1,120,000)
Net Estate Before Special Deductions P2,880,000 200,000 P3,080,000
Standard deductions (1,000,000)
Share of the surviving spouse (P200,000/2) (100,000)
Share of surviving spouse (P1,800,000/2) P1,480,000
****If silent and unless the problem clearly illustrate that it is exclusive, assume the property is common.
Value to take P1,500,0 00

1st Deduction: Mortgage paid -
Initial basis P1,500,000
(1,500/4,500) x 300,000 (100,000)
Vanishing Deduction P262,500 *****

CHAPTER 5 – ESTATE TAX CREDIT AND ESTATE TAX DISTRIBUTABLE
PROBLEM SOLVING
P5.1
(1)P200,000 (2)P0; not allowed
Estate Tax Due [P465,000 + (5M x 15%)] P1,215,000

Estate tax credit (4/10 x P1,215,000) vs P200,000 (200,000)
Estate tax payable P1,015,000
P5.2

Estate tax credit (67,500)
Estate tax payable after tax credit P67,500
Limit 1: Limit Actual Allowed

Canada: 500/2,000 x P135,000 P33,750 P150,000 P33,750
USA: 500/2,000 x P135,000 33,750 110,000 33,750
P67,500
Limit 2:
1,000/2,000 x P135,000 P67,500 260,000 67,500
ALLOWED TAX CREDIT P67,500
P5.3
 ASSUME: ESTATE TAX PAID U.S.A. = P250,000
(a) Net Taxable estate = P3,570,000; (b)Estate tax due after tax credit = P142,770
(c ) Net Distributable Estate = P4,427,230
House and lot, USA * P2,000,000

Investment in stock, Philippines 800,000
Investment in stock, USA 1,000 000
Investment in bonds, USA*** 700,000
Cash in bank, Philippines 300,000
Cash on hand, Philippines 50,000
Accounts receivable 200.000
Car, Philippines 800,000
Legacy in favor of Philippine National Red Cross** 50,000
Devise to Quezon City for children’s playground** 70,000

Accounts receivable (fully uncollectible) 200,000 (900,000)
Special Deductions:
Estate Tax Credit (164,930)
Limit: [(3,200/5,970) x 307,700 = P164,930
Actual: P250,000
ESTATE TAX DUE AFTER ESTATE TAX CREDIT P142,770
NOTE:*Family home is not allowed as a deduction for single decedent
**To be deductible, the legacy/devise should be included first in the decedent’s gross estate
*** Considered as Estate “within”
TOTAL GROSS ESTATE (Refer above) P5,970,000

Accounts receivable (fully uncollectible) 200,000 (900,000)
Special Deductions:
Standard deduction -
Estate Tax Due after tax Credit (142,770)
NET DISTRIBUTABLE ESTATE P4,427,230
P5.4
Real property, Philippines P4,000,000
Claim Against Insolvent Persons 50,000
Real property, USA 3,000,000
Real property, Japan 2,000,000
Net estate, Malaysia (1,000,000)
Total Gross Estate (common) P8,050,000
Funeral expenses (maximum) (200,000)
Judicial expenses (P200,000-100,000) (100,000)
Net estate before special deductions P7,650,000
X (Share of the surviving spouse) 1/2
Net estate of the decedent in the conjugal properties P3,825,000
Standard Deduction (1,000,000)
Family Home (1,000,000)
Medical Expenses (500,000)
TAX DUE:
1ST P500,000 P15,000

In excess of P500,000 @ 8% 66,000
ESTATE TAX DUE P81,000
Estate Tax Credit (None; No Estate Tax Payments abroad) ----
ESTATE TAX PAYABLE P81,000
Total Gross Estate (common; as computed above) P8,050,000

Funeral expenses (actual) (300,000)
Judicial expenses (actual) (200,000)
Net estate before special deductions P7,450,000
X (Share of the surviving spouse) 1/2
Net estate of the decedent in the conjugal properties P3,725,000
Standard Deduction ------
Family Home ------
Medical Expenses (actual) (650,000)
Estate Tax (81,000)
NET DISTRIBUTABLE ESTATE P2,994,000
MULTIPLE CHOICE
1. B 8. A 15. A 22. C 29. C
2. C 9. D 16. C 23. A 30. D
3. D 10. A 17. C 24. C 31. A
4. C 11. D 18. A 25. D 32. B
5. C 12. D 19. D 26. C
6. C 13. A 20. A 27. A
7. C 14. D 21. C 28. B
Supporting Computations:
No.5
Estate tax due (for P4M) P355,000
Estate tax credit (3/4 x P355,000) vs P80,000 (80,000)
Estate tax payable P275,000
No. 6
Estate tax due (for P500,000) P55,000
Less: Estate tax credit (20,500)

Singapore: 300/1,000 x P55,000 P16,500 P30,000 P16,500
USA: 100/1,000 x P55,000 5,500 4,000 4,000
P20,500
Limit 2:
400/1,000 x P55,000 P22,000 34,000 22,000

ALLOWED TAX CREDIT (LOWER AMOUNT) P20,500
No. 7
Gross Estate P10,000,000
Deductions (5,000,000)
Share of the surviving spouse (5,000,000 x 60% x 50%) (1,500,000)
Net taxable estate P3,500,000
Tax Due P300,000
Estate tax credit (2.8/3.5 x P300,000) vs P124,500 (124,500)
Net estate France = [(6M -2M) x 0.6 x 1/2] + (6M-2M) x 0.4 = P2,800,000
Net estate R.P. = [(4M-3M) x 0.6 x 1/2] + (4M-3M) x 0.4 = P700,000
No. 8
Estate tax due (for P500,000) P71,000
Less: Estate tax credit (41,417)

Japan: 300/1,200 x P71,000 P17,750 P20,000 P17,750
USA: Exclude for purposes of computing Limit 1 - - -
HK: 450/1,200 x P71,000 26,625 45,000 26,625
P44,375
Limit 2: (Include USA)
700/1,200 x P71,000 P41,417 65,000 41,417
ALLOWED TAX CREDIT (LOWER AMOUNT) P41,417
No. 9 and 10
Net Taxable Net Distributable
Property inherited P1,400,000 P1,400,000
Property acquired through own labor 3,600,000 3,600,000
Funeral expenses (200,000) (240,000)
Judicial expenses (200,000) (200,000)
Claims against the estate
Notarized (40,000) (40,000)
Not notarized - (20,000)
Standard deduction (1,000,000) -
Net Taxable/Distributable estate P3,560,000 P4,500,000
CHAPTER 6 – DONOR’S TAX
PROBLEM SOLVING
P6.1
ITEM Q#1 Q#2 Q#3 Q#4 Q#5
A P800,000 P800,000 P800,000 P800,000 P800,000
B 3,000,000 3,000,000 3,000,000
C 250,000 250,000 250,000 250,000

D 100,000 100,000 100,000 - 100,000
E* 5,000,000 5,000,000 5,000,000
F 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000
G 100,000 100,000 100,000 - 100,000
H 100,000 100,000 100,000 - -
I 500,000 500,000 500,000 500,000 500,000
Land 1** - - - - -
Land 2*** - - - - -
Land 3**** 5,000,000 5,000,000 5,000,000 - -
Car 200,000 200,000 200,000 200,000 200,000
GROSS P16,550,000 P16,550,000 P16,550,000 P3,000,000 P3,450,000
GIFT
*The question is “gross gifts”, hence, disregard the mortgage.

**Sale of Land #1 is a transfer with insufficient consideration. However, unlike in Estate Taxation,
Transfer with insufficient consideration for donor’s tax purposes is not taxable if the property
donated is a real property classified as capital asset subject to capital gains tax.
*** Sale of Land # 2 is considered bonafide or valid sale.

****Sale of Land #3 is a transfer with insufficient consideration. Nonetheless, the sale is subject to
donor’s tax because the property was not subjected to capital gains tax. Capital gains tax on real
properties are applicable only on sale of real properties classified as capital assets located in the
Philippines.
P6.2
ITEM Q#1 Q#2
A P4,500,00 P4,500,00
B 1,000,000 -
C 1,500,000 -
D 2,000,000 -
E 3,000,000 3,000,000
F 500,000 -
Car, Alabang 200,000 200,000
Car, Malaysia 200,000 -
Land Cebu - -
GROSS GIFT P12,900,000 P7,700,000
P6.3
1.P0 2.P5,000 3.P10,000 43,000
P6.4
Donation-Red Cross (exempt under a special law)* P100,000
Donation to Manila City Hall * 300,000
Mortgage on the land (400,000 x ¼) 100,000
Total deductions from the gross gifts P500,000
*Exempt donations which partake the nature of deductions and are, therefore , deductible from the gross gifts
to arrive at taxable net gifts.
P6.5
Relative Stranger
Cash to his son on account of marriage P50,000
Cash to PPCRV for 2013 election - -
Jewelry to his auntie 46,000
Shoes and bags to his girlfriend 30,000
Books to the City of Makati 20,000
Second hand car to his first cousin 500,000
Brand new SUV to his second cousin (subject to revocation) - -
Shares of stocks of a domestic corp. to his best friend 150,000
Car to his daughter (a donation mortis causa) - -
Forgiven a loan due from his brother(50,000-25,000) 25,000
Sports equipment to his brother in law 75,000
Parcel of land to the Philippine government for public use 1,000,000
Gross Gifts P621,000 P1,275,000
NOTE:
 Cash to PPCRV. Not considered as donation under the tax code. It is subject to the rules and regulations of
the COMELEC under the election code of the Philippines.
 Books for the City of Makati AND Land for Public Use. Although the donations are exempt, should be
considered in the determination of “gross gifts”
 Gift subject to revocation is not a gift.
 Donation mortis causa is a donation subject to estate tax, not donor’s tax.
P6.6
a) March 1 = P2,000
b) May 30 = P18,000
c) June 30 = P90,000
d) July 31 = P0
e) September 30 = P447,200
Solution
Gross Gifts P200,000
Dowry -  1 year after celebration
Net taxable gift P200,000
Donor’s Tax Due/ Payable – March 1 P2,000
Gross gift P500,000

Less: Mortgage assumed by the donee (100,000)
Add: Prior net gift 200,000
Taxable gift – May 30 P600,000
Donor’s Tax Due P20,000

Less: Tax paid (2,000)
Donor’s tax payable-May 30 P18,000
Donor’s tax payable-June 30 P90,000

(P300,000 x 30%)
Donor’s tax payable-July 31 (Bantay Bata) P0
September 30
Relative Stranger Total
Gross Gift P1,500,000 P1,500,000
Dowry (10,000) -
Mortgage assumed (300,000) (300,000)
Prior net gift 600,000
Taxable gift P1,790,000 P1,200,000

@30%
Tax Due P107,200 P360,000
Less: Tax Payments (20,000)
Tax Payable P87,200 360,000 P447,200
P6.7
1) January 15, 2012 = P32,000
2) April 1, 2012 = P6,000
3) December 25, 2012 = P0
4) March 30, 2013 = P30,000
5) May 25, 2013 = P0
Solution
Gross Gifts-Jan. 1, 2014 P1,000,000

Less: Encumbrance (200,000)
Taxable gift P800,000
Donor’s tax due/payable-Jan. 1, 2014 P32,000
Gross gift – April 1, 2014 P100,000

Add: Prior net gift 800,000
Donor’s Tax Due P38,000
Less: Tax paid (32,000)
Donor’s tax payable-Apr. 1, 2014 P6,000
December 25, 2014 P0
March 30, 2015 The rule that gift of not more than P100,000 is
P100,000 x 30% P30,000 exempt is applicable only to donations made
to relatives.
May 25, 2015
Gross gift P200,000
Deductions (200,000)
Taxable gift P0
Tax Due P0
P6.8
1) October 8, 2015 = P9,800
2) November 4, 2015 = P1,200
June 6, 2015
Husband Wife Total
Gross Gift P240,000 P240,000
Dowry (10,000) (10,000)
Taxable gift P228,000 P228,000
Donor’s Tax Payable P3,120 P3,120 P6,240
October 8, 2015
Husband Wife Total
Gross Gift P30,000 P30,000
Dowry --- (10,000)
Prior Net Gift 228,000
@30
Donor’s Tax (Tax Table) P3,920
Tax Paid-June 6 (3,120)
Donor’s Tax Payable P9,0000 P800 P9,800
November 4, 2015
Husband Wife Total
Gross Gifts (strangers) P7,000 P7,000
Exempt (5,000) (5,000)
Prior Net Gift - -
@30 @30
Donor’s Tax Payable P600 P600 P1,200
P6.9 (1)P7,000 (2)P2,600 (3)P69,800 (4)P30,000

Feb. 15, 2015
Mr.Macariola Mrs.Macariola Total
Gross Gifts P200,000 P200,000
Dowry (beyond 1 year) - -
Donor’s Tax Payable P1,000 P1,000 P2,000
March 30, 2015

Gross Gifts P200,000 P-
Donor’s Tax 8,000
Donor’s tax paid (1,000)
Donor’s Tax Payable P7,000 P7,000
June 1, 2015
Gross Gifts P- P100,000
Dowry - (10,000)
Taxable gift 240,000
Donor’s Tax P3,600
Donor’s tax paid (1,000)
Donor’s Tax Payable 2,600 P2,600

October 12, 2015

Donation to Donation to a Donation to a
Stranger Relative Relative
Gross Gifts P200,000 P200,000 P400,000
Dowry (claimed June 1) - - -
Prior net gift 350,000 240,000
Taxable gift 150,000 550,000 590,000
@30%
Donor’s Tax P17,000 P19,400
Donor’s tax paid (8,000) (3,600)
Donor’s Tax Payable P45,000 P9,000
Total P54,000 P15,800 P69,800
Gift Tax of Clifford P100k@30% = P30,000
P6.10 ------ (For Estate Tax)
TRUE OR FALSE
2. TRUE 8. TRUE 14. FALSE 20. FALSE 26. TRUE
3. FALSE 9. FALSE 15. FALSE 21. FALSE 27. FALSE
5. TRUE 11. TRUE 17. FALSE 23. FALSE 29. FALSE
6. TRUE 12. FALSE 18. FALSE 24. TRUE 30. FALSE
MULTIPLE CHOICE
1. A 11. D 21. C 31. C 41. B
2. A 12. B 22. A 32. D 42. A
3. C 13. C 23. D 33. A 43. A
4. C 14. D 24. C 34. B 44. C
5. B 15. B 25. C 35. D 45. B
6. D 16. D 26. D 36. C 46. B
7. D 17. A 27. C 37. B 47. D
8. D 18. B 28. D 38. D 48. D
9. D 19. C 29. B 39. D 49. A
10. C 20. D 30. B 40. A 50. C
Supporting computation:
No. 18. If the sale is considered fictitious, the entire value at the date of sale is subject to donor’s tax.
No. 21.
Letter “a” – onerous transfer
Letter “b” - To be considered valid donation, the renunciation should be specifically and categorically done in favor of
identified heir(s) to the exclusion or disadvantage of the other co-heir(s) in the hereditary estate.
Letter “c” – gratuitous transfer, subject to donor’s tax
No. 24 .
Donation to Pedro Clara
Gross Gifts (2M/2) /2 P500,000 P500,000
Less Dowry (10,000) -
Net taxable gift P490,000 P500,000

No. 27 .
DONEE
Son D. in Law
Gross Gifts (5M/2) P2,500,000 -
Less Dowry (10,000) -
Net taxable gift P2,490,000 -
No. 31-33 .
Husband Wife
NG (3/1) 125,000 125,000
Tax Due (P25,000 x 2%) P500 P500
GG (5/1) P100,000 P100,000

Dowry (10,000) (10,000)
PNG 3/1 125,000 125,000
NG P215,000 P215,000
Tax Due P2,600 P2,600

Tax Paid 3/1 (500) (500)
D.T. Payable P2,100 P2,100
GG (7/1) 100,000 100,000

PNG 3/1 and 5/1 215,000 215,000
TNG P315,000 P315,000
Tax Due 6,600 6,600
Total Taxes Paid 7/1 P13,200
No. 38 .
Tax Due P6,000
Tax Credit P4,500 vs. (200/300 x P6,000=P4,000) (4,000)
D.T.Pyable P2,000
CHAPTER 7 – BUSINESS TAXES

MULTIPLE CHOICE
1. A 7. B 13. D 19. C 25. A*
2. D 8. C 14. C 20. D 26. D
3. D 9. D 15. B 21. D 27. C**
4. D 10. C 16. C 22. A 28. A
5. D 11. A 17. A 23. D 29. A
6. C 12. C 18. D 24. C 30. C
* The end-useR (person using the communication facility is the one liable for OCT, not the communication company.
**3% CCT is applicable only to domestic carriers transporting passengers by land, not by air or sea.

CHAPTER 8 – VALUE ADDED TAX
ERRATUM:
 Page 257, Question#2 of Illustration 18 Case B. Change the following
Question2:
 Answer: P108,000 change to P372,000.
INPUT VAT Transfer costs (300,000)
(From BOC to the importer’s warehouse in Isabela)(P6,000,000 x 5%) x (36,000)
12%
 Page 258, Case B of Illustration 19 . Change the following data:

Freshko, a manufacturer of sardines has the following data for the month of June:
Sales, sardines, (net) P12,000,000 Change to P10,000,000
PROBLEM SOLVING
P8.1
Case A E
Case B E
Case C E
Case D V
P8.2
Case A X Case E V Case I V
Case B X Case F X Case J X
Case C V Case G V (0%)
Case D V Case H V
P8.3
a) nil
b) Vat Payable = P134,400 x 3/28 = P14,400
c) Vat Payable = OV P201,600 x 3/28 – Input Vat P14,400 = P7,200
d) nil
P8.4
Cash Sales P660,800
Sales on account 246,400
Transactions deemed sale (22,400+16,800+19,040+8,960) 67,200
Total sales subject to vat P974,400
x 3/28
Output Vat P104,400
Less: Input vat (P291,200 x 3/28) (31,200)
Vat Payable P73,200
P8.5
OUTPUT:
Sales (P8M – 400,000) x 12% P912,000

Sales from consignment (March and Feb.) 36,000
(20+10) x P10,000 x 12%
Transactions deemed sales
January 8 consignment (20 x P10,000) x 12% 24,000
Goods withdrawn 6,000
Goods taken as payment to creditors 3,600 P981,600
INPUT VAT
Purchase of goods, supplies, freight/insurance) 82,080
Capital goods (P1,100,000 x 12%) / 48 mos. 2,750 (84,830)
VAT PAYABLE P896,770
P8.6
Sale of school supplies P1,680,000
Sale of gift items 1,008,000
Sales subject to output vat P2,688,000
x 3/28
Output Vat P288,000
Less:
 Input vat on purchases directly attributable to vatable
sales (Purchase of school supplies and gift items)
P1,344,000 x 3/28 P144,000
 Input vat on purchases attributable to vatable and
nonvatable sales (Purchase of computers)
P448,000 x 3/28 x (2,400/3,600)** P32,000
 Purchase of office supplies used in vatable and non-
vatable transactions from non-vat registered suppliers nil (176,000)
Vat Payable P112,000
**Total Vatable Sales net of vat = P2,400,000
Non-vatable sales = P1,200,000
Total Sales, net (vatable and non-vatable) = P3,600,000
P8.7
Output Vat (P896,000 x 3/28) P96,000 Note:
Less: Input vat The input vat on capital goods is not amortized because the
acquisition cost is not more than P1M.
 P224,000 x 3/28 (24,000)
 P112,000 x 3/28 x 80% (9,600) The ratio of vatable sales to total sales = 80%
 P2,240 x 3/28 x 80% (192)
Vat Payable P62,208
P8.8 Assume amounts are vat inclusive

(a)
Total Input Vat (P374,000 + 69,848 + 154,000 + 55,000) x 3/28 = P69,948
(b)
Output vat (P330,000 + P274,996) x 3/28 P64,821
Less: Input vat (P374,000 + 69,848 + 154,000) x 3/28 (64,055)
Vat Payable P766
Note: Sale to export oriented enterprise is considered export sale subject to 0% vat only if more than 70% of
its annual production is actually exported

P8.9
(a) P28,800
(b) P12,600
Output Vat (P350,000 x 12%) P42,000
Less:
 Input vat on importation:
CIF (cost, insurance, freight) value P229,195
Charges/expenses incurred in claiming the goods:
Wharfage 1,540
Arrastre 2,295
Customs duty 4,090
Brokerage fee and documentary stamps 330
Facilitation expense -
Marine cargo insurance 2,550
Total P240,000
x 12% (28,800)
 Input vat on Freight from customs to warehouse (600)
Vat Payable P12,600
P8.10
(a)
1st Quarter Output Vat (P3M x 12%) P360,000
INPUT VAT:
Purchases (P1.2M x 12%) (144,000)
Purchase of machinery (P2.5M x 12%) / 36 x 3mos. (24,500)
Unused input vat as of end of 2014 (125,000)
Vat Payable P66,500
(b)
2nd Quarter Output Vat (4.8M x 12%) P576,000
Input Vat
Purchases (P3M x 12%) (360,000)
Unused input vat on capital goods (P2.5M x 12%-24,500) (275,500)
Excess Input vat (P59,50
0)
P 8.11
Output vat (P336,000 x 12%) P40,320
Input vat:
On purchases (P112,000 x 3/28) (12,000)
Transitional input vat:
Higher between 2% of beg. Invty vs. P10,000 (10,000)
Vat Payable P18,320
P8.12
(a) P3,400
(b) P80,000
Output vat (P800,000 x 12%) P96,000

Less: Input Vat
Presumptive I.V (P85,000 x 4%) (3,400)

Purchased of olive oil (P67,200 x 3/28) (7,200)
Purchased of can containers (P25,000 x 12%)) (3,000)
Payments for paper labels (P12,000 x 12%) (1,440)
Purchased of cardboard for boxes (P8,960 x 3/28) (960)
Payments for hauling services nil
Vat Payable P80,000
P 8.13
Output vat (672,000 x 3/28) P72,000
Less: Input Vat
Pres. Input vat on purchased of fruits from farmers @ 4% (8,000)
Purchased of bottles (P22,400 x 3/28) (2,400)
Purchased of can containers (P50,000 x 12%) (6,000)
Payments for paper labels (P5,600 x 3/28) (600)
Purchased of cardboard for boxes (P3,360 x 3/28) (360)
Payments for hauling services (P60,000 x 12%) (7,200)
Vat Payable P47,440
P 8.14
Subject to Value Added Tax
Hotel rooms (P1.8M x 12%) P216,000
Dining Hall:
Sale of food and refreshments (P2.2M x 12%) 264,000
Sale of wine, beer and liquor (P950,000 x 12%) 114,000
Other revenues (P700,000 x 12%) 84,000
Subject to Percentage Tax (Amusement Tax)

Disco:
Sale of food and refreshments (P1.6M x 18%) 288,000
Sale of wine, beer and liquor (P1.2M x 18%) 216,000
TOTAL BUSINESS TAXES P1,182,00
0
P 8.15
OUTPUT VAT based on collections
(15M + 10M + 5M) P3,600,000
INPUT VAT on purchases from:
Alpha (P12M – 1.2M) x 12% (1,296,000)
Bravo (non-vat reg.) -
Charlie (P4M – 1M) x 12% (360,000)
Delta (P2M x 12%) (240,000)
Vat Payable P1,704,00
0

P 8.16
Output vat ((P4M – 2.5M) x 12% P180,000
Less: input vat (P800,000 x 12%) (96,000)
Vat Payable P84,000
P8.17
Ratio of Initial Payment over Selling Price:
Lot A = 50/250 = 20% ; Installment Sale
Lot B = 70/200 = 35%; Deferred Sale; Treated as Cash Sale
Lot C = 60/300 = 20%; Installment Sale
Nov. 2015 Dec. 2015
Lot A: P25,000 x 12%; P25,000 x 12% P3,000 P3,000
Lot B: P200,000 x 12% 24,000 -
Lot C: P40,000 x 12%; P20,000 x 12% 4,800 2,400
Vat Payable P31,800 P5,400
P8.18
a) Output vat September 2015 = P3M x 12% = P360,000
The sale is a Deferred sale. Ratio of initial payments over SP is 30%.
b) Output vat January 2016 = P0
P 8.19
Room charges P1,000,000
Laundry services 25,000
Food and beverages 1,500,000
Corkage 15,000
Handling charges for providing telephone, 4,500
telex, cable or fax services
Cake shop sales 80,000
Total P2,624,500
Vat rate 12%
Output Vat for the month P314,940
TRUE OR FALSE
SET A
1. T 6. F 11. F 16. T 21. F
2. F 7. F 12. F 17. F 22. F
3. F 8. F 13. F 18. F 23. T
4. T 9. T 14. F 19. T 24. F
5. T 10. T 15. F 20. T 25 F
SET B
1. T 6. F 11. F 16. T 21. T
2. T 7. F 12. F 17. T 22. T
3. T 8. F 13. T 18. T 23. T
4. F 9. T 14. F 19. F 24. T
5. F 10. F 15. T 20. F 25 F
MULTIPLE CHOICE
1. D 21. C 41. B 61. B 81. D
2. C 22. A 42. C 62. B 82. A
3. A 23. C 43. D 63. C 83. B
4. D 24. C 44. D 64. D 84. D
5. D 25. D 45. B 65. A 85. D

6. D 26. C 46. D 66. C 86. B
7. D 27. D 47. D 67. B 87. C
8. D 28. B 48. C 68. D 88. D
9. A 29. C 49. C 69. A 89. C
10. C 30. B 50. D 70. D 90. D
11. C 31. A 51. B 71. D
12. A 32. D 52. C 72. A
13. A 33. A 53. B 73. D
14. D 34. B 54. D 74. B
15. C 35. B 55. D 75. C
16. C 36. B 56. C 76. D
17. A 37. B 57. A 77. C
18. D 38. B 58. B 78. D
19. D 39. C 59. C 79. C
20. D 40. A 60. A 80. B
Supporting Computations/explanations:
No. 12 “III” is exempt only if contribution per member is not more than P15,000.
No. 20
Output Vat (P2,805,500 +P1,524,000) x 12% P519,540
Input vat (P1,102,200+P1,012,500) x 12% (253,746)
Vat Payable P265,780
No. 21
Output Vat, 3rd quarter (P150,000 x 12%) P18,000
Input vat, 3rd quarter (P120,000 x 12%) (14,400)
Deferred input vat – previous quarter (6,000)
Vat Payable (Carry-over) (P2,400)
No. 37
AR, July 1 P180,000
Billings, July-Sept. 850,000
AR, Sept. 30 (120,000)
Collections P910,000
Output vat @ 12% 109,200
Input vat on purchases @ 12% (57,600)
Vat Payable P51,600
No. 38
Output vat (P5.5M x 12%) P660,000
Input vat on materials (180,000)
Vat Payable September 2014 P480,000
No. 39
Output vat (P10M x 12%) P1,200,000
Input vat on materials (480,000)
Input vat on capital goods (36,000)
(P3Mx12%) /60 mos.
Vat Payable June 30, 2014 P684,000
No. 41
Sales, shares held as inventory P5,000,000
Cos of shares, held as inventory (2,000,000)

Gross income 3,000,000
Vat rate 12%
Output vat P360,000
Les: Input vat
Supplies expense 12,000
Rent expense 24,000 (36,000)
Vat payable P324,000
No. 49
Domestic sales (P600,000 x 12%) P72,000
Add: Transaction deemed sales
Jan. 4 consignment (P200,000 x 12%) 24,000
Goods consumed on Fe. 27 (P50,000 x 12%) 6,000
Property dividends (P150,000 x 12%) 18,000
Total Output Vat P120,000
No. 66 & 67
Output vat (P592,480 x 3/28) P63,480
Less: Input Vat
Purchases of goods (P100,000 x 12%) P12,000
Purchases of services (P20,000 x 12%) 2,400
Transitional input vat 4,800 (19,200)
VAT Payable P44,280
No. 72
Output Vat for October 2014 = P3M x 12 = P360,000
 Ratio of Initial Pay’t over Gross S.P. = P900,000/P3,000,000 = 30%
 If initial payment is more than 25% of Selling Price, the sale is classified as Deferred Sale which is treated as
Cash Sale. Therefore, the entire output vat is due on the month of sale.
No. 73
Output Vat for 2015 = P0; The entire output vat was paid in 2014
No. 74
Downpayment P112,000
1st installment payment 112,000
Total (vat inclusive) 224,000
Less: VAT (P224,000 x 3/28) (24,000)
Initial Payment (exclusive of vat) P200,000
Divide by contract Price (P1,120,000 x 3/28) 1,000,000
Ratio of Initial Payment over SP 20%
Output vat for 2014 (P200,000 x 12%) P24,000
No. 75
VAT ON CASH SALE: P72,000
(ZV is higher than SP) (P600,000 x 12%)
VAT ON DEFERRED SALE: 36,000
(Ratio of Initial payment over SP  25%
(Not qualifying under installment method)
(Treated as cash sale; SP is higher than FMV)
[(P336,000/1.12) x 12%]
TOTAL OUTPUT VAT P108,000
No. 78 and 79
Output vat (P336,000 x 3/28) P36,000
Input vat (56,000 + 11,200) x 3/28 x 300/500 (4,320)
Vat Payable P31,680
No. 80
OUTPUT VAT (P896,000 x 3/28) P96,000
INPUT VAT
Purchases of goods, vat business, vat included (24,000)
(P224,000 x 3/28)
MIXED Transactions:
Purchases of supplies, for vat & non vat business
[(112,000 x 3/28) x (800,000/1,000,000)] (9,792)
Purchase of depreciable asset, for use in vat and non vat business
[(P2,240 x 3/28) x (800,000/1,000,000)]
VAT PAYABLE P62,208
No. 81 and 82
OUTPUT VAT
Domestic sales (P330,000 + P274,996) x 3/28 P64,821
Export sales (zero rated) 0
INPUT VAT
Purchases of goods, supplies and services for domestic sales and for export (374,000
+ 69,848 + 154,000 + 55,000) x 3/28 (69,948)
Vat Payable (P5,127)
No. 83
Raw Materials (P560,000 x 3/28) x 400,000/1M P24,000
Supplies (P448,000 x 3/28) x 400,000/1M 19,200
Equipment (P300,000 x 12% x 400,000/1M) 14,400
INPUT VAT ATTRIBUTED TO EXPORT SALES P57,600

Transfer and Business Taxes Solutions Manual Tabag Garcia 2015 PDF

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Transfer and Business Taxes Solutions Manual Tabag Garcia 2015 PDF

Uploaded by

Copyright:

Available Formats

SOLUTIONS MANUAL

TRANSFER & BUSINESS TAXATION, 2015 Edition

CHAPTER 1 – SUCCESSION & TRANSFER TAXES

CHAPTER 2 – GROSS ESTATE

1| Transfer & Business Taxation(2015 Edition) by Tabag and Garcia

2| Transfer & Business Taxation(2015 Edition) by Tabag and Garcia

Supporting Computations (Multiple Choice):

3| Transfer & Business Taxation(2015 Edition) by Tabag and Garcia

(32). (P12M/100,000) x 1,000 shares = P120,000

CHAPTER 3 – DEDUCTIONS FROM THE GROSS ESTATE

4| Transfer & Business Taxation(2015 Edition) by Tabag and Garcia

(P3.3) P183,500 computed as follows:

(P3.4) (Claim Against Insolvent Persons)

Case B: P333,333 computed as follows:

Case C: P0. Debtor is not insolvent

CaseD: P0. Debtor is not insolvent

Receivable (CAIP) P500,000

(P3.5) P133,333 computed as follows:

Receivable (CAIP) P200,000

5| Transfer & Business Taxation(2015 Edition) by Tabag and Garcia

(P3.8) P265,000 computed as follows:

6| Transfer & Business Taxation(2015 Edition) by Tabag and Garcia

(P3.9) P2,500,000 computed as follows:

(P3.10) P262,500 computed as follows:

(P3.11) STANDARD DEDUCTION

(P3.13) FAMILY HOME

(P3.14) P1,550,000 computed as follows:

7| Transfer & Business Taxation(2015 Edition) by Tabag and Garcia

(P3.16) Question 1: P2,757,500 computed as follows:

Question 2: P2,672,330 computed as follows:

8| Transfer & Business Taxation(2015 Edition) by Tabag and Garcia

Less: Mortgage paid (150,000-75,000) (75,000)

Initial Basis P500,000

Less: Proportionate Deduction

x Vanishing Deduction Rate 20%

VANISHING DEDUCTION P85,170**

(P3.17) Question 1: P426,000 computed as follows:

Question 2: P4,174,000 computed as follows:

9| Transfer & Business Taxation(2015 Edition) by Tabag and Garcia

Supporting Computation (Multiple Choice):

10 | Transfer & Business Taxation(2015 Edition) by Tabag and Garcia

CHAPTER 4 – PROPERTY RELATIONS

11 | Transfer & Business Taxation(2015 Edition) by Tabag and Garcia

12 | Transfer & Business Taxation(2015 Edition) by Tabag and Garcia

Exclusive properties P10,000,000

Conjugal properties 20,000,000 P30,000,000

Funeral expenses (200,000) (200,000)

Judicial expenses (300,000) (300,000)

Claims against conjugal properties (200,000) (200,000)

Claims against exclusive properties* (400,000) (400,000)

Legacy-local government (Tr. for Public Use) ** (723,800) - (723,800)

VANISHING DEDUCTION*** (1,676,200) (1,676,200)

Net exclusive/conjugal P7,200,000 P19,300,000 P26,500,000

Standard deduction (1,000,000)

Medical expenses (500,000)

Amount received under RA4917 (1,500,000)

Share of the surviving spouse (P19.3M/2) (9,650,000)

NET TAXABLE ESTATE P14,850,000

ESTATE TAX DUE (Refer to the Tax Table) P2,185,000

TRANSFER FOR PUBLIC USE

13 | Transfer & Business Taxation(2015 Edition) by Tabag and Garcia

P4.6 (Decedent: Resident Alien)

14 | Transfer & Business Taxation(2015 Edition) by Tabag and Garcia